Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.

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China--Land of the Rising Patent Regime

China's patent regime (and I"P" system generally) is growing like a weed. Trademark applications there have increased 60% in five years. The number of patents issued has almost doubled to 850,000.

China has added 50 courts that handle I"P" cases. The lawyers are getting rich and, of course, are preventing non-Chinese firms from filing patents or representing clients in court. In fact, the lawyers are the main beneficiaries of the monopoly formerly known as intellectual property. Isn't monopoly great?

The Economist notes that under Mao private property was considered to be theft of the masses. However, it gets it wrong when it implies that the patent laws enacted in China starting in 1985 (and enforced starting in 2001) were consistent with private property.

Patents are a kind of theft of the masses. As Prodhoun should have said, "intellectual property is theft."


I believe the commonly used paraphrase is "Intellectual Property is Mind Theft."
In my experience in Korea, you will not get enforcement of IP rights until the country enforcing them has domestic IP it wants protected. In Korea, we were trying to get the police to close small retailers selling pirate software and music CDs and movie DVDs. It proved to be pointless; the cops didn't have the heart to put the little guys out of business and they were soon back up and running. Things changed when Korean creators of IP wanted their monopolies protected. The fact that it is beginning to happen in China as suggested in this story is encouraging for the IP monopolists. We will soon have to look elsewhere for piracy. Fortunately there will always be another poor developing country in which to find it.
I wonder if the best anti-IP strategy might be to lobby the Chinese government, perhaps via some fellow economists at distinguished Chinese universities. The system is so ossified in the US that reform seems hopeless. But in China, the leaders might recognize the value of innovation and competition based upon the rapid tech transfer they achieved through leaky foreign joint ventures and that sort of thing. (And, BTW, I think this would have been a great example for the Against Intellectual Monopoly book -- Western firms couldn't extract their monopoly profits in China, but were willing to go there anyway!) Furthermore, the Chinese leaders, after being lectured by Western economists for so long, might relish some policy one-upmanship. The central government has the power to establish this sort of policy, and might find anti-monopoly rhetoric to be politically convenient in the near future, now that unemployment is rising. And then, once China begins to eclipse the West technologically with the use of its secret weapon -- weak IP law -- perhaps the fear and amazement will be enough to change the system here too.


Chinese companies are quite prolific patenters in the west. For example, Chinese companies increased the number of patents they obtained in the U.S. by a factor of nearly 20 between 1994 and 2007. U.S. companies, in comparison, increased their patents by about 40-45% in the same time frame, and Japanese companies increased their patents by only about 50%.

China has also recognized the value of a robust domestic patent system as foreign companies enter their country and often dominate the local technology. Indeed, Chinese investors are now asking whether patents are available to protect newly developed products. I think there are indications that Chinese companies (as has been typical with Japanese companies) may well be more strategically adept at using intellectual property than most western companies.

Why would China want to give up such a valuable tool to protect inventiveness? I suspect your entreaties will not only fall on deaf ears, but ears that are more frequently more pro-IP than western listeners.


Mind theft? That is sick. You cannot steal something from an inventor unless the inventor wishes to make the invention available to the world. To pretend that an inventor should be required to share their invention is a travesty.

Patents that can be used against Western firms are always useful, of course. The question is, might China's leaders be convinced that enforcing patent claims among Chinese firms is a bad idea? I notice that L.E.H. opposes the premise of this blog, so let's just consider that question to be hypothetical.

Given that American trade representatives have been whining for years over lax IP enforcement in China, perhaps continued feet-dragging could eventually result in retaliation from the US. But what does China have to lose? If their economy is flexible enough, then maybe they can afford a hit to their export markets. Why do they need to sell anything for the next 10 years? The world owes them $1.9 trillion, last I checked.

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